Business Review

A number of factors have shifted to the Zanaga Project's benefit in the last few years, including (a) robust iron ore demand in China and increased pricing for benchmark iron ore; (b) record price premiums for high quality iron ore products above benchmark price level; (c) upgrading of rail, road and port infrastructure, particularly across the border from Zanaga in Gabon; (d) reductions in third party contractor pricing in the mining industry globally; and (e) reduced energy costs.

The Zanaga Project Team has considered these factors in developing its strategy for assessing the options available for the development of the Zanaga Project and has made significant progress in this regard.

Since early 2017 the Zanaga Project Team has been actively investigating the potential for the development of an EPP which would entail a small-scale, low capital cost operation utilising road and potentially rail transportation solutions as well as existing port infrastructure. This strategy is aligned with the Jumelles Shareholders' desire to seek a low capital cost initial production phase, derisking the operation, delivering a first product into the seaborne market, and potentially assisting the objective to position the 12Mtpa Stage One project for the raising of finance from investors.

The Zanaga Project Team have worked to assess a number of revised scale options for the initial development of the EPP project, and critical to this work is determining a viable product and suitable logistics solution for transportation to an exit port at reasonable cost. Further background and information is provided in ZIOC's "Project Update Announcement" on 8 March 2018.

The objectives of the Zanaga Project Team are to determine the feasibility of the following project:

a) A viable EPP that demonstrates attractive economics in the current, and long term, iron ore price environment by producing a high quality iron ore product.

b) Produce a pellet feed iron ore concentrate from the enriched near surface, hematite dominated Zanaga ores with a target final grade of minimum 65% Iron, approximately 5% combined silica plus alumina, and <0.05% phosphorus that can attract price premiums similar to those being achieved by similar products from other mining companies.

c) Seek to secure additional margin by establishing the viability of producing pellets from the Zanaga pellet feed concentrate using polymer based binders ("Cold Pelletisation"), to produce pellets with physical and chemical properties that will be attractive to global iron ore markets, attract price premiums similar to those being achieved by conventional pellets, and be produced at a low cost.

Early Production Project (EPP) Update

1. Product test results

Following ZIOC's announcement on 8 March 2018, further test work has been conducted by independent third party experts on the viability of producing pellet feed concentrate from Zanaga's surface ores.

The results of this test work confirm that simple gravity based processing of the friable enriched, hematite dominated, near surface Zanaga iron ore can produce an even higher quality pellet feed iron ore concentrate product than that which was announced in March 2018. The latest test results achieved a pellet feed concentrate grading 67.4% iron, combined silica plus alumina of 5.9%, and 0.03% phosphorus.

As previously indicated, a significant test work programme has been conducted on the potential to further advance the desirability of the Zanaga product by processing Zanaga's iron ore to produce a pellet feed concentrate product and to then pelletise this product. While conventional pellets are typically manufactured in plants that require high capital cost which is not normally viable for smaller scale operations, the Zanaga Project Team have been working with a technology company that has been developing an alternative solution of pelletising iron ore concentrate by utilising a polymer binding agent capable of converting pellet feed into a pellet (Cold Pelletisation) at lower cost than conventional pelletisation processes.

Independent technical experts were commissioned to conduct a series of trial tests on various batches of Zanaga pellets, produced by the technology provider using Zanaga pellet feed concentrate. Cold Pelletisation using polymer binders is not a "one size fits all" solution and the test work required numerous iterations of Zanaga pellet feed concentrate and various chemical compositions of the polymers in order to identify the optimum polymer formula for the ore being processed. The objective of this pelletisation test work is to ascertain the viability of utilising this technology to produce pellets from Zanaga pellet feed and the viability of incorporating a Cold Pelletisation process into the Zanaga project's EPP Project, or even the larger 30Mtpa project.

The results show that the Zanaga EPP project's pellet feed concentrate has the potential to be pelletised using a Cold Pelletisation process. These positive laboratory results indicate that the Zanaga pellets would withstand the duress of transportation and should be attractive for purchase by a steel mill.

The team is now engaging in a process where confirmatory tests will be undertaken and then to engage with a leading European steel mill to ascertain the acceptability of this product. This is a very encouraging opportunity which could provide helpful additional economic margin to the business across both the EPP project solution as well as potentially being viable for the larger 30Mtpa project.

2. Cold Pelletisation overview

Cold Pelletisation is a relatively new technology that has been enabled by advancements in the development of industrial polymers.

The viability of Cold Pelletisation in relation to the development of any significant iron ore prospect or any operating iron ore mine has still to be demonstrated and tested. Whether Cold Pelletisation will emerge as a real competitor to, and advance on, conventional pelletisation is still unknown. The advocates of Cold Pelletisation will need to demonstrate to steel mills and end users that pellets produced by this novel process can successfully achieve, and if possible surpass, the specifications and performance of pellets produced by conventional methods. In particular, the advocates of this process would need to show on a consistent basis by reference to operations of a reasonable scale that polymer bound pellets are able to demonstrate the potential for strong physical characteristics which would result in minimal degradation resulting from road, rail and shipping transport (assessed using tumble, drop and cold crush strength tests), while also meeting the performance requirements of a steel mill customer.

The perceived potential benefits of Cold Pelletisation, as advocated by the technology providers are low capital cost, low incremental operating costs and low environmental footprint. The extent to which the proposed benefits are achievable is still to be tested and established. The application of Cold Pelletisation techniques to actual commercial operations are still in the early stages of development.

It is important for shareholders to understand that there is a difference between the products that the team is considering. Based upon test work carried out so far, any Zanaga pellet feed concentrate product would be a traditional product of a kind which is regularly provided by mining companies today. By contrast, the polymer based pellet that would be envisaged to be produced as part of the EPP initiative, is a novel product that has very little track record in the marketplace. Ascertaining the acceptability of this polymer pellet product with steel mills is key to determining the viability of incorporating this solution into any development plans for the EPP project. In fact it may be the case that the EPP project is considered best suited to a pure pellet feed concentrate production scenario until such time as polymer pelletisation is developed to an acceptable degree of market acceptance.

3. Transportation and Logistics

The Zanaga Project Team has been evaluating potential road and rail routes from the Zanaga mine site to an exit port either in Pointe-Noire (PAPN), RoC or Owendo (close to Libreville), Gabon which would be used for the EPP project. A number of service providers have been approached to ascertain the cost of exporting via these routes.

Gabon logistics solution for the EPP Project

The Zanaga EPP project envisages trucking approximately 170km from the Zanaga mine site to the Transgabonais rail siding in Franceville, Gabon. From there the ore would be loaded into wagons and railed to the new port of Owendo in Libreville for export.

In terms of the rail logistics component, in 2016 the International Finance Corporation ("IFC"), a member of the World Bank Group, and Proparco, the private sector financing arm of the French Development Agency provided US$58 million of financing to Société d'Exploitation du Transgabonais ("SETRAG"), the operator of the 650 kilometre Transgabonais rail line ("Transgabonais") between Franceville and Libreville to increase capacity and improve efficiency of the railway line. The Transgabonais serves Gabon's main central economic corridor and connects the country's iron ore and manganese mines to international markets. SETRAG has used the funds to increase the railway's transport capacity while also improving its reliability.

Our understanding is that the railway line currently has approximately 300ktpa excess capacity to service the EPP project following the upgrades that have been completed. In addition, this excess rail capacity is expected to be expanded in stages to approximately 1MTPA by 2020. Further engagement with SETRAG is expected to result in a higher degree of understanding on the potential to secure access to this railway line and determine pricing for its usage.

Regarding a port solution in Gabon, the Project Team have engaged with the Gabon Special Economic Zone ("GSEZ"), the management company and developer of the new port infrastructure located at Owendo. GSEZ is the outcome of the public-private partnership between Olam International, a leading global agri-corporation the Gabonese Republic and Africa Finance Corporation. More than US$ 500 million has been invested in the construction and development of the new port infrastructure, including a minerals harbour of 45 hectares which was completed in October 2017. It is understood that that more than 1MTPA of capacity is available at the port today. The Zanaga Project Team are engaging with GSEZ in an effort to understand the potential pricing associated with this option.

RoC logistics solution for the EPP Project

In RoC the Project Team are investigating the viability of trucking material from the mine site to the Port of Pointe-Noire, or pursuing a combination of transportation solutions including road transportation to the railway line in Mossendjo, whereby it would be taken by rail to the port of Pointe-Noire. One of Zanaga's neighbouring exploration projects has commenced operations in May 2018 to transport iron ore along this railway line to the Port of Pointe Noire.

Significant study work has already been conducted and published by Zanaga and its neighbouring exploration and development mining projects into the viability of the rail route. It is encouraging to see progress being made to deliver operating capability of a small scale on this rail line for bulk materials. The continuous operation of this rail route remains challenging however and some progress is still required in order to manage the challenges of establishing a reliable rail operation. We remain encouraged by the determination of the current operator and look forward to a viable rail route being established to the port of Pointe Noire. However, our understanding is that a viable rail route option would still require significant upgrading and the provision of finance to achieve this.

4. EPP Project next steps

Port access remains a key consideration for the Zanaga Project Team. Discussions have taken place with both authorities at the Port of Libreville in Gabon and Port of Pointe Noire in Congo but additional work and discussions are required to establish a conclusive outcome. Key to the assessment of the solution will be the ability to secure port access and ensure capacity of the road and rail routes.

The Zanaga Project Team continue to evaluate the options available and intend on reaching a conclusive decision on the best transportation route to market during H2 2018.

The team has outlined a number of next steps, including the following:

a) Complete the extensive product test work program in relation to the pellet feed concentrate

b) Continue the product test work program to assess the viability of using a Cold Pelletisation process to produce a pellet product using Zanaga pellet feed concentrate

c) Advance study work on mining, process, power and logistics solutions in order to define capital and operating cost elements of the EPP project

d) Conduct preliminary assessment of the marketing of the product

e) Present the outcomes to the Jumelles board of directors (the "Jumelles Board") and to the shareholders of Jumelles, ZIOC and Glencore for further consideration

The purpose of these steps is to establish whether the EPP project is a viable proposition. If the Jumelles Board and the shareholders of Jumelles (ZIOC and Glencore) conclude that the EPP is a viable proposition, and support taking the EPP initiative forward, that would enable the Zanaga Project Team to then engage with governmental bodies, regulators and contractors as to the permitting process and contractual structures. At the same time, the Zanaga Project would then be in a position to commence discussions with various parties on potential financing solutions for the development of the EPP project.

30Mtpa staged development project

Since the 2014 Feasibility Study ("FS") was produced, based on a 12Mtpa Stage One Project, industry input costs have dropped significantly. During 2015 and 2016 the Project Team, and the Jumelles shareholders, considered it premature to consider a re-costing of the FS. However, in light of developments in the market, it was considered sensible to obtain a "high level" indicative review of certain costs of the Project (including costs generated by exchange rate movements) by an external consultancy firm.

As a result, a decision was taken by Jumelles to commission an internationally recognised technical consulting group, to carry out a "high level" capex and opex review with no re-engineering. The review, which was considered in detail by the Jumelles Board in May 2017 indicated that as regards the costs of the 12Mtpa Stage One Project, there was potential scope for capital cost savings of between 8% and 19% (US$153m to US$371m) and for operating cost savings of between 15% and 20%. This outcome was driven by potential reductions in costs of steel, oil, labour, contractor rates, freight, and weaker forex rates for key input cost items versus the US Dollar.

To have better defined these potential savings to feasibility study levels of confidence, using cost estimates from the full suite of technical consultants who were engaged on the 2014 FS, would have cost an estimated US$180,000. The possibility of proceeding with such a workstream is kept under review as an option. Various inputs would of course have changed since Q2 2017, so the outcomes would be different from those referred to above. Any decision to proceed with such FS re-costing is largely dependent on whether industry sentiment is conducive to new partner investors entering into a serious dialogue on financing the 12Mtpa Stage One Project.

While it is encouraging to see the potential positive impact on the Zanaga Project's FS, and ultimately the potential improvement in the economic returns of the Project, it is important to recognise that these numbers are not yet costed to a high level of definition and are high level estimates that only indicate potential savings. In order to better define these estimates the Project Team would require further work to be conducted ahead of considering a full re-estimate of the 2014 Feasibility Study to updated feasibility study level. It is also important to be reminded that the quantum of capital required for the development of the Zanaga Project, even if significantly reduced, is still a significant financing challenge and requires a substantial level of conviction in the stability of long term iron ore prices.

As a result, the Project Team believe there are significant advantages available to the larger project by first pursuing the potential development of the EPP project and establishing its viability. Delivering a viable EPP project would result in benefits such as:

a) Derisking of a number of logistical matters which are required for the larger project, including export and import solutions

b) Establishment of product acceptance in the iron ore industry

c) Operating cash flows, some of which might be available for financing part of the equity component of the Stage One mining project

d) Development of operating skills and a larger operating presence at the Zanaga mine site

Furthermore, the Zanaga Project Team will continue to engage in activity to ascertain opportunities for optimisation and improvement of the 30Mtpa staged development project and will update the market as these improvements develop.

New Mineral Port Update

In March 2013, the RoC signed a Memorandum of Understanding with China Communications Construction Company ("CCCC"), and its subsidiary China Road and Bridge Corporation ("CRBC"), for the development of a new multi-user port facility 9km north of the existing port of Pointe-Noire at Pointe Indienne, including a deepwater bulk export facility for the iron ore industry. CRBC has conducted a significant amount of work on this major project, including a feasibility study on the port development.

ZIOC notes that there is still discussion between the RoC Government, China EXIM Bank and China Road and Bridge Corporation (CRBC) on the financing and development plan for the new bulk materials port development north of Pointe Noire.

Advancement of the new port development could provide a key catalyst in allowing the Zanaga 12Mtpa Stage One development project to derisk and proceed towards seeking finance.

CRBC has confirmed to the Zanaga Project team that it is engaged in discussions with Chinese funding institutions on the development of the New Mineral Port at Pointe-Indienne. ZIOC confirms that a non-binding LOI has been provided to CRBC by Jumelles' subsidiary, MPD Congo and four other mining companies to support the development of this port; such LOI outlines the ned to hold discussions with CBRC to determine an economically and technical viable development of the new port in alignment with the needs of the mining companies.

Power

The Project Team are engaging on a variety of solutions for off-grid power suitable for the EPP project, including a particular focus on sourcing a solar power solution combined with fuel and or battery backup power.

As regards the staged 30Mtpa Project the strategy is to connect the Project to the national network. The Project's 100MW power requirement would be supplied by existing and planned power generation capacity in the country, particularly the Mourala dam project and the different dam projects in the Louessé valley (close to Mossendjo).

Power would be delivered to the mine site through two connection points to the current 220kV transmission network within 160km and 200km of a proposed new transmission line to the east and south of the mine site respectively. The Zanaga Project team has been engaging with potential IPPs and Government departments in order to develop a power supply for the Project. The team will be conducting further work during the remainder of 2018 on the potential for a power solution to be defined.

The Project's Stage Two ramp up to 30Mtpa is expected to increase power demand to approximately 230MW at the mine site and 16MW for the Project's facilities at the proposed new port. The increased mine site demand is sufficient to support independent power generation from locally available energy sources and we will plan this development in coordination with other planned regional power infrastructure developments.

The Project Team have also been working with a number of third parties to investigate the potential for optimisation of the power solution designed for the staged 30Mtpoa Project outlined the 2014 Feasibility Study. A number of projects in the RoC are under investigation and could form part of the power solution for the Project. In addition, a number of areas of optimisation of the initial design are under investigation today.

Permitting

In November 2017 ZIOC announced that the Zanaga Project had been awarded an Environmental Permit by the Ministry of Environment of the RoC. The Environmental Permit covers the Zanaga Project's first phase of development pursuant to its Mining Licence granted in August 2014, as outlined in the Zanaga Project's Feasibility Study.

The receipt of the Environmental Permit was a significant milestone in the advancement of the Zanaga Project, together with the Zanaga Project's Mining Licence granted in August 2014, and Mining Convention (promulgated as a law of the RoC, following ratification by the Parliament of the RoC and publication in the Official Gazette in May 2016).

Product Pricing for benchmark iron ore products (Delivered to North China Port)

As part of the work being undertaken by the Zanaga Project Team, close attention is paid to prices which iron ore products currently achieve. The following Table includes the prices and premiums that are available where iron ore is beneficiated so as to produce a high grade pellet feed concentrate. The Table also illustrates the prices and premiums that can be achieved by converting high grade pellet feed concentrate into pellets, using conventional pelletisation processes.

	Average Price (last 12 months)	Price premium per tonne (above 62% Fe Benchmark Iron Ore Product)
62% Fe CFR Benchmark Iron Ore Product	US$67.5	-	-
65% Fe CFR Pellet Feed Concentrate Premium	US$87.2	US$19.8	29.3%
Pellet Premium (65% Fe)	US$131.9	US$64.5	95.6%

Source: Beijing CU Steel, 26 June 2018

This information is purely by way of illustration of the current situation in the world market for iron ore. The extent to which production from the Zanaga Project could achieve comparable prices and premiums is uncertain and speculative. Moreover, there is no certainty what the level and structure of prices and premiums would be at the time that the Zanaga Project is developed.

Next Steps

The Project Team remains encouraged by improving iron ore market conditions for premium products and the support this provides to advancing the Zanaga Iron Ore Project.

During 2018, the Zanaga Project Team will be progressing a number of important value-adding activities. Advancement of the EPP Project's product test work and logistical solutions is a key near term objective and the Company intends to provide further updates on its study work in H2 2018 as milestones are achieved. In addition, the team will be further assessing the opportunity for potential reductions to capital and operating costs of the 30Mtpa staged development project.

Financial Review

Results from operations

The financial statements contain the results for the Group's seventh full year of operations following its incorporation on 19 November 2009. The Group made a total comprehensive loss in the year of US$1.4m (2016: total comprehensive loss US$3.06m). The total comprehensive income for the year comprised:

	2017 US$000	2016 US$000
General expenses	(943)	(1,257)
Net foreign exchange (loss)/gain	366	(1,083)
Share-based payments	-	(2)
Share of loss of associate (including impairment by associate)	(824)	(619)
Interest income	8	16
Loss before tax	(1,393)	(2,945)
Tax	-	(15)
Currency translation	52	(103)
Share of other comprehensive income of associate -foreign exchange	(48)	7
Total comprehensive income	(1,389)	(3,056)

General expenses of US$0.9m (2016: US$1.3m) consists of US$0.4m professional fees (2016: US$0.2m), US$0.3m Directors' fees (2016: US$0.3m) and US$0.2m (2016: US$0.8m) of other general operating expenses.

The share-based payment charge reflects the expense associated with the grant of share options to ZIOC's Directors and senior managers under ZIOC's long-term incentive plan ("LTIP") and to the expense associated with the grant of share options to three of ZIOC's consultants. Further details of the LTIP and share options granted can be found in the notes to the financial statements.

The share of loss of associate reflected above relates to ZIOC's investment in the Project, through the Jumelles group, which, generated a loss of US$1.6m in the year to 31 December 2017 (2016: loss US$1.2m). During the year Jumelles spent a net US$1.7m (2016 US$1.2m) on exploration, net of a currency translation loss US$0.1m (2016: gain US$0.07m).

Financial Position

ZIOC's Net Asset Value (NAV) of US$41.3m (2016: US$42.6m) comprises of US$37.6m (2016: US$37.8m) investment in Jumelles, US$3.7m (2016: US$4.9m) of cash balances and US$0.3m (2016: US$0.05m net current liabilities) of other net current liabilities.

	2017	2016
	US$000	US$000
Investment in Associate	37,589	37,873
Fixed Assets	-	-
Cash	3,721	4,852
Net current assets/(liabilities)	(27)	(53)
Net assets	41,283	42,672

Cost of investment

The Investment in Associate relates to the carrying value of the investment in Jumelles which as at 31 December 2017 continued to own 100% of the Project. During 2017, under the existing 2017 Funding Agreement between the Company and Glencore, the Company contributed a further US$0.6m (2016: US$0.7m). Though a long term project, in the light of currently forecast market conditions, the carrying value of the exploration asset continues to be held in Jumelles at US$80m (2016 US$80m). The Company accounts for 50% less one share of Jumelles.

As at 31 December 2017, Jumelles had aggregated assets of US$81.9m (2016: US$82.6m) and aggregated liabilities of US$0.8m (2016: US$0.8m). Assets consisted of US$80.0m (2016: US$80m) of capitalised exploration assets, US$1.5m (2016: US$1.8m) of other fixed assets, US$0.3m cash (2016: US$0.7m) and US$0.1m other assets (2016: US$0.1m). Net of a currency translation loss of US$0.1m (2016: gain US$0.1m) a net total of US$1.6m (2016: US$1.2m) of exploration costs were capitalised during the year.

Cash flow

Cash balances decreased by US$1.1m during 2017 (2016 decrease US$2.8m), net of interest income US$0.01m (2016 US$0.02m) and a foreign exchange gain of US$0.36m (2016 loss US$1.08m) on bank balances held in UK Sterling. Additional investment in Jumelles required under the 2017 Funding Agreement (outline details in Note 1 to the financial statements) utilised US$0.6m (2016: US$0.7m) and operating activities utilised US$0.5m (2016: US$1.1m).

Fundraising activities

There were no fundraising activities during 2017 (2016: nil).

Reserves & Resource Statement

The Zanaga Project has defined a 6.9bn tonne Mineral Resource and a 2.1bn tonne Ore Reserve, reported in accordance with the JORC Code (2012), and defined from only 25km of the 47km orebody identified.

Ore Reserve Statement

The Ore Reserve estimate (announced by the Company on 30 September 2014) was prepared by independent consultants, SRK Consulting (UK) Ltd ("SRK") and is based on the 30Mtpa Feasibility Study and the 6,900Mt Mineral Resource (announced by the Company on 8 May 2014).

As stipulated by the JORC Code, Proven and Probable Ore Reserves are of sufficient quality to serve as the basis for a decision on the development of the deposit. Based on the studies performed, a mine plan was determined in 2014 to be technically achievable and economically viable.

Ore Reserve Category	Tonnes (Mt_Dry)	Fe (%)	SiO₂ (%)	Al₂O₃ (%)	P (%)
Proved	770	37.3	35.1	4.7	0.04
Probable	1,300	31.8	44.7	2.3	0.05
Total	2,070	33.9	41.1	3.2	0.05

Notes:

Long term price assumptions are based on a CFR IODEX 62% Fe forecast of 60 US$/dmt (97 US¢/dmtu at 62% Fe) with adjustments for quality, deleterious elements, moisture and freight.

Discount Rate 10% applied on an ungeared 100% equity basis

Mining dilution ranging between 5% and 6%

Mining losses ranging between 1% and 5%

Note: The full Ore Reserve Statement is available on the Company's website (www.zanagairon.com)

Mineral Resource

Classification	Tonnes (Mt)	Fe (%)	SiO₂ (%)	Al₂O₃ (%)	P (%)	Mn (%)	LOI (%)
Measured	2,330	33.7	43.1	3.4	0.05	0.11	1.46
Indicated	2,460	30.4	46.8	3.2	0.05	0.11	0.75
Inferred	2,100	31	46	3	0.1	0.1	0.9
Total	6,900	32	45	3	0.05	0.11	1.05

Reported at a 0% Fe cut-off grade within an optimised Whittle shell representing a metal price of 130 USc/dmtu. Mineral Resources are inclusive of Reserves. A revised Mineral Resource, prepared in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012 Edition) was announced on 8 May 2014 and is available on the Company's website (www.zanagairon.com).

Note: The figures shown are rounded; they may not sum to the subtotals shown due to the rounding used.

The Mineral Resource was estimated as a block model within constraining wireframes based upon logged geological boundaries. Tonnages and grades have been rounded to reflect appropriate confidence levels and for this reason may not sum to totals stated.

Geological Summary

The Zanaga Iron Ore deposit is located within a North-South oriented (metamorphic) Precambrian greenstone belt in the eastern part of the Chaillu Massif in South Western Congo. From airborne geophysical survey work, and morphologically, the mineralised trend constitutes a complex elongation in the North-South direction, of about 48 km length and 0.5 to 3 km width.

The ferruginous beds are part of a metamorphosed, volcano-sedimentary Itabirite/BIF and are inter-bedded with amphibolites and mafic schists. It exhibits faulted and sheared contacts with the crystalline basement. As a result of prolonged tropical weathering the BIF has developed a distinctive supergene iron enrichment profile.

At surface there is sometimes present a high grade (+60% Fe) canga of apparently limited thickness (<5m) capping a discontinuous, soft, high grade, iron supergene zone of structure-less hematite/goethite of limited thickness (<7m). The base of the high grade supergene iron zone grades quickly at depth into a relatively thick, leached, well-weathered to moderately weathered friable hematite Itabirite with an average thickness of approximately 25 metres and grading 45-55% Fe.

The base of the friable Itabirite zone appears to correlate with the moderately weathered/weakly weathered BIF boundary, and fresh BIF comprises bands of chert and magnetite/grunerite layers.

Competent Persons

The statement in this announcement relating to Ore Reserves is based on information compiled by Mr Gabor Bacsfalusi who is a Chartered Professional Member of the Australasian Institute of Mining and Metallurgy. He is a mining engineer and Principal Consultant of SRK Consulting (Canada) Inc. He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the JORC Code (2012). The Competent Person, Mr Gabor Bacsfalusi, confirms that the historical (2014) Ore Reserve Estimate is accurately reproduced in this Annual Report and given his consent to the inclusion in the report of the matters based on his information in the form and context within which it appears. For the avoidance of doubt, SRK confirms that it has not undertaken any further additional technical work subsequent to publication of the 2016 Annual Report.

The information in the announcement that relates to Mineral Resources is based on information compiled by Malcolm Titley, BSc MAusIMM MAIG, of CSA Global (UK) Ltd. Malcolm Titley takes overall responsibility for the Report as Competent Person. He is a Member of the Australasian Institute of Mining and Metallurgy ("AUSIMM") and has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Competent Person in terms of the JORC Code. The Competent Person, Mr Malcolm Titley, has reviewed this Mineral Resource statement and given his permission for the publication of this information in the form and context within which it appears.

Definition of JORC Code

The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012) as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.

Principal Risks & Uncertainties

The principal business of ZIOC currently comprises managing ZIOC's interest in the Zanaga Project, including the Jumelles group, and monitoring the development of the Project and engaging in discussions with potential investors. The principal risks facing ZIOC are set out below. Risk assessment and evaluation is an essential part of the Group's planning and an important aspect of the Group's internal control system.

Risks relating to the agreement with Glencore and development of the Zanaga Project

The Zanaga Project is majority controlled at both a shareholder and Director level by Glencore. The ability of the Company to control the Zanaga Project and its operations and activities, including the future development of the Project (including any variant such as an EPP development) and the future funding requirements of Jumelles, is therefore limited.

The future development of the mine and related infrastructure (including any variant such as an EPP development) will be determined by the Jumelles Board. There can be no certainty that the Jumelles Board will approve the construction of the mine and related infrastructure or any variant thereof such as an EPP development, including the taking of preparatory steps associated with the construction of the mine and related infrastructure, such as front end engineering and design, or the undertaking of work needed to assess the viability of an EPP development or any component part of an EPP development.

Risks relating to future funding of the Zanaga Project

Under the Joint Venture Agreement between the Company, Glencore and Jumelles of 3 December 2009, as amended (the "JVA"), there is no obligation on the Company or Glencore to provide further funding to Jumelles. The Company and Glencore have reached agreement on a work programme and funding of the Zanaga Project for 2018. As such agreement relates to 2018, there is a risk that after 31 December 2018 Jumelles may be subjected to funding constraints and this could have an adverse impact upon the Project. Moreover, discretionary amounts are contained in the 2018 work programme and budget; these require the joint approval of ZIOC and Glencore. It is possible that as regards certain items, joint approval would not be forthcoming.

Risks relating to iron ore prices, markets and products

The ability to raise finance for the Project is largely dependent on movements in the price of iron ore. Iron ore prices have historically been volatile and are primarily affected by the demand for and price of steel and the level of supply of iron ore. Such prices are also affected by numerous other factors beyond the Company's and the Jumelles group's control, including the relative exchange rate of the U.S. dollar with other major currencies, global and regional demand, political and economic conditions, production levels and costs and transportation costs in major iron ore producing regions.

While it is anticipated that there will be a stabilisation of iron ore prices in the global market for iron ore, the timing of such stabilisation and the level of iron ore prices which eventually emerges is uncertain. Although the 2014 FS identifies the product from the Project and the potential demand for such product within a range of iron ore prices, there are no assurances that the demand for the Project's product will be sufficient in quantity or in price to ensure the economic viability of the Project or to enable finance for the development of the Project to be raised. Furthermore, the range of iron ore prices in the FS will need to be reviewed so as to reflect changed market conditions and changed expectations relating to the supply and demand for iron ore.

Risks relating to an EPP

There is currently an initiative to investigate the possibility of a low-cost small scale start-up, using existing infrastructure, focussing on a standard 62% Fe benchmark iron ore product or a high grade 65% Fe pellet feed iron ore product that would involve simple 'processing' applications. Separately, the possibility of a low-cost small scale start-up involving the production of a pellet feed concentrate and 'cold pelletisation' process, based on new and relatively untested cold pelletisation technology, is also being investigated. There is a risk that such start-ups are found not to be viable or are not proceeded with for other reasons.

Pelletising Test Results and confirmatory testing

The purpose of the pelletising test work carried out was to test sizing and processing techniques to produce a client defined target concentrate, which, with the application of novel cold binding technologies, would be capable of producing transportable pellets or briquettes that conform to international marketplace accepted chemical and physical parameters.

Over a seven month period, various processing techniques were tested to achieve the target grade stipulated by the client. As part of the test work, pellets with varying binder compositions were tested for their RDI characteristics partly at a European steel mill and partly at a certified laboratory in Germany. The results of the latest three batches of pellets with slightly different binder compositions, tested by a recognised laboratory in Germany, all produced positive results with two of the three samples returning results that exceeded the project targets.

The steel industry is notoriously cautious in adopting new technologies so further work will be required for the full acceptance of this product. A leading British Institute which has worked with the Zanaga Project Team has recommended that as a next step three confirmatory batches of ~20kg each be prepared from the bulk Zanaga concentrate using the recently successful polymer binder formula. It is the view of the Company that two of the batches should be sent for confirmatory testing by a European steel mill and one batch to the certified laboratory in Germany.

While it is hoped that any such confirmatory test work on the three new batches of pellets would be in line with the already obtained results of the latest three batches of tested pellets, mentioned above, the outcome of such confirmatory tests cannot be predicted and it is possible that the results might produce a different outcome. Depending on such confirmatory test work proceeding, it is likely that this confirmatory test work would be carried out and completed within the period of approximately four to six weeks. If the confirmatory tests are positive, a further programme of work involving, for example, testing of larger batches and engagement with steel mills and others, would need to be undertaken and this could be a relatively lengthy process and involve additional costs.

Risks relating to financing the Zanaga Project

Any decision of the Jumelles Board to proceed with construction of the mine and related infrastructure (or any variant such as a low capital cost, small scale start-up EPP project) is itself dependent upon the ability of Jumelles to raise the necessary debt and equity to finance such construction and the initial operation of the mine (or any variant such as a low-cost small scale start-up). Jumelles may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all and should this occur, it is highly likely to pose challenges to the proposed development of the Zanaga Project and the proposed timeline for its development. Moreover, the global credit environment may pose additional challenges to the ability of Jumelles to secure debt finance or to secure debt finance on acceptable terms, including as to rates of interest.

Risks relating to financing of the Company

The Company will not generate any material income until the first stage of the Project has been constructed and mining and export of the iron ore has successfully commenced at commercial volumes. In the meantime the Company will continue to expend its cash reserves. Should the Company seek to raise additional finance, it may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all.

If construction of the mine and related infrastructure proceeds (including any preparatory steps associated with the construction of the mine and related infrastructure) or any small scale start-up proceeds, and ZIOC elects to fund its pro rata equity share of construction capital expenditure, there is no certainty as to its ability to raise the required finance or the terms on which such finance may be available.

If ZIOC raises additional funds (including for the purpose of funding the construction of the Project or any part of the Project) through further issuances of securities, the holders of ordinary shares could suffer significant dilution, and any new securities that ZIOC issues could have rights, preferences and privileges superior to those of the holders of the ordinary shares.

If the Company fails to generate or obtain sufficient financial resources to develop and operate its business, this could materially and adversely affect the Company's business, results of operations, financial condition and prospects.

Risk relating to Ore Reserves estimation

Ore Reserves estimates include diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserve estimates are by their nature imprecise and depend, to a certain extent, upon statistical inferences and assumptions which may ultimately prove unreliable. Estimated mineral reserves or mineral resources may also have to be recalculated based on changes in iron ore or other commodity prices, further exploration or assessment or development activity and/or actual production experience.

Host country related risks

The operations of the Zanaga Project are located mainly in the RoC. These operations will be exposed to various levels of political, regulatory, economic, taxation, environmental and other risks and uncertainties. As in many other countries, these (varying) risks and uncertainties can include, but are not limited to: political, military or civil unrest; fluctuations in global economic and market conditions impacting on the economy; terrorism; hostage taking; extreme fluctuations in currency exchange rates; high rates of inflation; labour unrest; nationalisation; changes in taxation; illegal mining; restrictions on foreign exchange and repatriation. In addition, the RoC is an emerging market and, as a result, is generally subject to greater risks than in the case of more developed markets.

HIV/AIDS, malaria and other diseases are prevalent in the RoC and, accordingly, the workforce of the ZIOC group and of the Jumelles group will be exposed to the health risks associated with the country. The operating and financial results of such entities could be materially adversely affected by the loss of productivity and increased costs arising from any effect of HIV/AIDS, malaria and other diseases on such workforce and the population at large.

Weather conditions in the RoC can fluctuate severely. Rain storms, flooding and other adverse weather conditions are common and can severely disrupt transport in the region where the Jumelles group operates and other logistics on which the Jumelles group is dependent.

The host country related risks described above could be relevant both as regards day-to-day operations and the raising of debt and equity finance for the Project. The occurrence of such risks could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group.

Risks relating to the Project's licences and the regulatory regime

The Project's Mining Licence was granted in August 2014 and a Mining Convention has been entered into. With effect from 20 May 2016, the Zanaga Mining Convention has been promulgated as a law of the RoC, following ratification by the Parliament of the RoC and publication in the Official Gazette.

The holder of a Mining Licence is required to incorporate a Congolese company to be the operating entity and the Congolese Government is entitled to a free participatory interest in projects which are at the production phase. This participation cannot be less than 10%. Under the terms of the Mining Convention, there is a contingent statutory 10% free participatory interest in favour of the Government of the RoC as regards the mine operating company and a contingent option for the Government of the RoC to buy an additional 5% stake at market price.

The granting of required approvals, permits and consents may be withheld for lengthy periods, not given at all, or granted subject to conditions which the Jumelles group may not be able to meet or which may be costly to meet. As a result, the Jumelles group may incur additional costs, losses or lose revenue and its business, result of operations, financial condition and/or growth prospects may be materially adversely affected. Failure to obtain, renew, enforce or comply with one or more required approvals, permits and consents could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group. Mitigation of such risks is in part dependent upon the terms of the Mining Convention and compliance with its terms.

Transportation and other infrastructure

The successful development of the Project depends on the existence of adequate infrastructure and the terms on which the Project can own, use or access such infrastructure. The region in which the Project is located is sparsely populated and difficult to access. Central to the Zanaga Project becoming a commercial mining operation is access to a transportation system through which it can transport future iron ore product to a port for onward export by sea. In order to achieve this it will be necessary to access a port at Pointe-Indienne, which is still to be constructed. The nature and timing of construction of the proposed new port are still under discussion with the government of the RoC and other interested parties. In relation to the pipeline and Project facilities at the proposed new port and (to the extent needed) other infrastructure, the necessary permits, authorisations and access, usage or ownership rights have not yet been obtained.

Failure to construct the proposed pipeline and/or facilities at the proposed port and/or other needed infrastructure or a failure to obtain access to and use of the proposed port and/or other needed infrastructure or a failure to do this in an economically viable manner or in the required timescale could have a material adverse effect on the Project.

The availability of reliable and continuous delivery of sufficient quantity of power to the Project at an affordable price will also be a significant factor on the costs at which iron ore can be produced and transported to the proposed port and will impact on the economic viability of the Project.

Reliable and adequate infrastructure (including an outlet port, roads, bridges, power sources and water supplies) are important determinants which affect capital and operating costs and the ability of the Jumelles group to develop the Project. Failure or delay in putting in place or accessing infrastructure needed for the development of the Zanaga Project could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group.

Risks associated with access to land

Pursuant to the laws of the RoC, mineral deposits are the property of the government with the ability to purchase surface rights. Generally speaking, the RoC has not had a history of native land claims being made against the state's title to land. There is no guarantee, however, that such claims will not occur in the future and, if made, such claims could have a deleterious effect on the progress of development of the Project and future production.

The Mining Convention envisages that the RoC will carry out a process to expropriate the land required by the Zanaga Project and place such land at the disposal of the holder of the Mining Licence in order to build the mine and the infrastructure, including the pipeline, required for the realisation of the Zanaga Project. This means that the rights of the Jumelles company which holds the Mining Licence to the relevant land will be subject to negotiation between the Congolese government and such company. Alternatively, if the land is not declared DUP (i.e. is expropriated by the State under its sovereign powers) then the Jumelles group will have to reach agreement with the local land owners which may be a more time consuming and costly process.

Risks relating to timing

Any delays in (i) obtaining rights over and access to land and infrastructure (ii) obtaining the necessary permits and authorisations (iii) the construction or commissioning of the mine, the pipeline or facilities at the port or power transmission lines or other infrastructure, or (iv) negotiating the terms of access to the port and supply of power and other infrastructure, or (v) raising finance to fund the development of the mine and associated infrastructure, could prevent altogether or impede the development of the Zanaga Project, including the ability of the Zanaga Project to export its future iron ore products whether on the anticipated timelines or at projected volumes and costs or otherwise. Such delays or a failure to complete the proposed infrastructure or the terms of access to infrastructure or to do this in an economically viable manner, could have a material adverse effect on the business, results of operations, financial condition and prospects of the Company and/or the Jumelles group.

Environmental risks

The operations and activities of the Zanaga Project are subject to potential risks and liabilities associated with the pollution of the environment and the disposal of waste products that may occur as a result of its mineral exploration, development and production, including damage to preservation areas, over-exploitation and accidental spills and leakages. Such potential liabilities include not only the obligation to remediate environmental damage and indemnify affected third parties, but also the imposition of court judgments, administrative penalties and criminal sanctions against the relevant entity and its employees and executive officers. Awareness of the need to comply with and enforcement of environmental laws and regulations continues to increase. Notwithstanding precautions taken by entities involved in the development of the Project, breaches of applicable environmental laws and regulations (whether inadvertent or not) or environmental pollution could materially and adversely affect the financial condition, business, prospects and results of operations of the Company and/or the Jumelles group.

Health and safety risks

The Jumelles group is required to comply with a range of health and safety laws and regulations in connection with its business activities and will be required to comply with further laws and regulations if and when construction of the Project commences and the mine goes into operation. A violation of health and safety laws relating to the Project's operations, or a failure to comply with the instructions of the relevant health and safety authorities, could lead to, amongst other things, a temporary shutdown of all or a portion of the Project's operations or the imposition of costly compliance measures. If health and safety authorities require the Project to shut down all or a portion of its operations or to implement costly compliance measures, whether pursuant to applicable health and safety laws and regulations, or the more stringent enforcement of such laws and regulations, such measures could have a material adverse effect on the financial condition, business, prospects, reputation and results of operations of the Company and/or the Jumelles group.

Risks relating to third party claims

Due to the nature of the operations to be undertaken in respect of the development of the Zanaga Project, there is a risk that substantial damage to property or injury to persons may be sustained during such development. Any such damage or injury could have a material adverse effect on the financial condition, business, prospects, reputation and results of operations of the Company and/or the Jumelles group.

Risks relating to outsourcing

The FS envisages that certain aspects of the Zanaga Project will be carried out by third parties pursuant to contracts to be negotiated with such third parties. There is a risk that agreement might not be reached with such third parties or that the terms of any such agreement are more stringent than currently anticipated; this could adversely impact upon the Project and/or the proposed timescale for carrying out the Project.

Fluctuation in exchange rates

The Jumelles group's functional and reporting currency is the U.S. dollar, and most of its in country costs are and will be denominated in CFA francs and Euros. Consequently, the Jumelles group must translate the CFA franc and Euro denominated assets and liabilities into U.S. dollars. To do so, non-U.S. dollar denominated monetary assets and liabilities are translated into U.S. dollars using the closing exchange rate at the balance sheet date. Consequently, increases or decreases in the value of the U.S. dollar versus the Euro (and consequently the CFA franc) and other foreign currencies may affect the Jumelles group's financial results, including its assets and liabilities in the Jumelles group's balance sheets. These factors will affect the financial results of the Company. In addition, ZIOC holds the majority of its funds in Pounds Sterling, and incurs the majority of its corporate costs in Pounds Sterling, but its contributions to funding the Jumelles group in 2016 are calculated in U.S. dollars. Consequently, any fluctuation in exchange rates between Pounds Sterling versus the U.S. dollar or the Euro, could also adversely affect the financial results of the Company.

Cash resources

The Company has limited cash resources. Although the Company has taken steps to conserve its cash resources, there is a risk that depletion of such cash resources will adversely affect the Company. Continuing volatile and uncertain economic conditions in the global iron ore market means that there can be no certainty as to when the Zanaga resource is likely to be developed. The difficult prevailing economic conditions also impact upon the ability of the Jumelles group to raise new finance for the project. The Company's cash resources will come under increasing pressure unless a more benign investment and trading climate materialises in the foreseeable future. As to when such a climate might materialise, there is still a lack of consensus.

Financial Statements

Consolidated statement of comprehensive Income

for year ended 31 December 2017

		2017	2016
	Note	US$000	US$000
Administrative expenses		(577)	(2,342)
Share of loss of associate	6b	(824)	(619)
Operating loss	4	(1,401)	(2,961)
Interest income		8	16
Loss before tax		(1,393)	(2,945)
Taxation	5	-	(15)
Loss for the year		(1,393)	(2,960)
Items that will not be reclassified subsequently to profit or loss: Share of other comprehensive income of associate - foreign exchange translation		(48)	7
Items that may be reclassified subsequently to profit or loss: Foreign exchange translation - foreign operations	6b	52	(103)
Other comprehensive income/(loss)		4	(96)
Total comprehensive loss		(1,389)	(3,056)
(Loss) per share
Basic (Cents)	12	(0.5)	(1.1)
Diluted Cents)	12	(0.5)	(1.1)

Loss and total comprehensive loss for the year is attributable to the equity holders of the parent company.

The notes form an integral part of the financial statements.

Consolidated balance sheet

for year ended 31 December 2017

		2017	2016
	Note	US$000	US$000
Non-current assets
Property, plant and equipment	6a	-	-
Investment in Associate	6b	37,589	37,873
		37,589	37,873
Current assets
Other receivables	7	49	60
Cash and cash equivalents	8	3,721	4,852
		3,770	4,912
Total Assets		41,359	42,785
Current liabilities
Trade and other payables	9	(75)	(113)
Net assets		41,284	42,672
Equity attributable to equity holders of the parent
Share capital	10	267,012	267,012
Accumulated deficit		(229,055)	(227,662)
Foreign currency translation reserve		3,327	3,322
Total equity		41,284	42,672

The notes form an integral part of the financial statements.

These financial statements were approved by the Board of Directors on 28 June 2018 and were signed on its behalf by:

Mr Clifford Elphick

Director

Consolidated statement of changes in equity

for year ended 31 December 2017

			Foreign
			currency
	Share	Accumulated	translation	Total
	capital	deficit	reserve	equity
	US$000	US$000	US$000	US$000
Balance at 1 January 2016	267,010	(224,702)	3,418	45,726
Consideration for share-based payments	2	-	-	2
Loss for the year	-	(2,960)	-	(2,960)
Other comprehensive income	-	-	(96)	(96)
Total comprehensive loss	-	(2,960)	(96)	(3,056)
Balance at 31 December 2016	267,012	(227,662)	3,322	42,672
Balance at 1 January 2017	267,012	(227,662)	3,322	42,672
Consideration for share-based payments	-	-	-	-
Loss for the year	-	(1,393)	-	(1,393)
Other comprehensive income	-	-	4	4
Total comprehensive loss	-	(1,393)	4	(1,389)
Balance at 31 December 2017	267,012	(229,055)	3,327	41,283

Consolidated cash flow statement

for year ended 31 December 2017

		2017	2016
	Note	US$000	US$000
Cash flows used in operating activities
Loss for the year		(1,393)	(2,960)
Adjustments for:		-	-
Depreciation		-	3
Interest receivable		(8)	(16)
Taxation expense		-	15
Decrease/(Increase) in other receivables		11	398
(Decrease)/Increase in trade and other payables		(38)	(21)
Net exchange gain/(loss)		(313)	895
Gain on part sale of project interest		-	-
Share of Loss in associate		824	619
Share-based payments		-	2
Tax paid		-	(27)
Net cash used in operating activities		(917)	(1,092)
Cash flows used in financing activities
Cash flows used in investing activities
Interest received		8	16
Investment in Associate		(588)	(676)
Net cash used in investing activities		(580)	(660)
Net decrease in cash and cash equivalents		(1,497)	(1,752)
Cash and cash equivalents at beginning of year		4,852	7,602
Effect of exchange rate difference		366	(998)
Cash and cash equivalents at end of year	8	3,721	4,852

The notes form an integral part of the financial statements.

Notes to the financial statements

1 Business information and going concern basis of preparation

Background

Zanaga Iron Ore Company Limited (the "Company"), was incorporated on 19 November 2009 under the name of Jumelles Holdings Limited. The Company changed its name on 1 October 2010. The Company is incorporated in the British Virgin Islands ("BVI") and the address of its registered office, is situated at Ground Floor, Coastal Building Wickham's Cay II, Road Town P.O. Box 2136, Carrot Bay VG1130 Tortola, British Virgin Islands. On 18 November 2010, the Company's share capital was admitted to trading on the AIM Market ("AIM") of the London Stock Exchange ("Admission"). The Company's principal place of business as an investment holding vehicle is situated in Guernsey, Channel Islands.

At 31 December 2010 the Company held 100% of the share capital of Jumelles Limited subject to the then Xstrata Call Option (as defined below).

On 14 March 2011 the Company incorporated and acquired the entire share capital of Zanaga UK Services Limited for US$2, a company registered in England and Wales which provides investor management and administrative services.

In 2007, Jumelles became the special purpose holding company for the interests of its then ultimate 50/50 founding shareholders, Garbet Limited ("Garbet") and Guava Minerals Limited ("Guava"), in MPD Congo which, owns and operates 100% of the Zanaga Project in the RoC (subject to a minimum 10% free carried interest in MPD Congo in favour of the Government of the RoC).

In December 2009 Garbet and Guava contributed their then respective 50/50 joint shareholding in Jumelles to the Company.

Guava is majority owned by African Resource Holdings Limited ("ARH"), a BVI company that specialises in the investment and development of early stage natural resource projects in emerging markets. Guava owns approximately 31.83% of the share capital of the Company.

At the time that Garbet was a shareholder in the Company, it was majority owned by Strata Limited ("Strata"), a private investment holding company based in Guernsey, which specialises in the investment and development of early stage natural resource projects in emerging markets, predominately Africa. Until 3 April 2017 Garbet owned approximately 41.49% of the share capital of the Company. Pursuant to a transaction effected on 2 April 2017 Garbet ceased to hold any shares in the Company. As part of such transaction the shares in the Company which were held by Garbet were transferred directly or indirectly to Garbet's shareholders and the shareholders of Garbet's holding company, Strata.

Jumelles has three subsidiary companies, namely Jumelles M Limited, Jumelles Technical Services (UK) Limited and MPD Congo.

Xstrata Transaction

On 16 October 2009, Garbet and Guava and Jumelles entered into a transaction with Xstrata (Schweiz) AG (on 3 December 2009, Xstrata (Schweiz) AG was substituted by Xstrata Projects (pty) Limited ("Xstrata Projects"), comprising of two principal transaction agreements (together the "Xstrata Transaction"):

· a call option deed which gave Xstrata Projects an option to subscribe for 50% plus 1 share of the fully diluted and outstanding shares of Jumelles ("Majority Stake") in return for providing funding towards ongoing exploration of the Zanaga exploration licence area and a pre-feasibility study (the "PFS") subject to a minimum amount of US$50 million (the "Xstrata Call Option"). Under the terms of the Xstrata Call Option, the consideration payable by Xstrata Projects for the option shares that would be issued by Jumelles would comprise (i) a commitment to fund all costs to be incurred by Jumelles in completing an FS (provided such amount shall be greater than US$100 million) or to carry out such a feasibility study at its own cost and (ii) payment of an amount (up to a maximum of US$25 million) equal to the amount that Jumelles owes to Garbet and Guava as loans which would be used to repay the latter; and

· an Agreement which regulated the respective rights of the Company, Jumelles and Xstrata Projects in relation to Jumelles following exercise of the Xstrata Call Option. Subsequently:

o Xstrata merged with the Glencore group on 2 May 2013 to form Glencore Xstrata and the holding company of the merged group subsequently changed its name to Glencore plc.

o Under the terms of the Supplemental Agreement announced on 13 September 2013, the scope of the above mentioned FS was modified to a staged development basis, and the revised basis FS was completed in May 2014. The Supplemental Agreement also extended the work programme beyond the conclusion of the FS, up to December 2014 (towards which the Company contributed US$17m from existing resources), and the Glencore call option over the Company's remaining 50% less one share shareholding in Jumelles was deleted.

During 2010, the PFS progressed and following completion of Phase I of that study Xstrata Projects countersigned a further funding letter confirming in writing its agreement (subject to the provisions of the Xstrata Call Option) to contribute further funding and confirming its approval of the phase II work programme, budget and funding amount (up to US$56.49 million) as set out in that letter.

Xstrata Projects exercised the Xstrata Call Option on 11 February 2011 and the founding shareholder loans were repaid. The final elements of the call option price consideration were the completion of the Feasibility Study and costs thereof, and these were completed in April 2014.

Relationship between Jumelles and its shareholders after exercise of the Xstrata Call Option (Post February 2011)

The Company, Jumelles and Xstrata Projects agreed to regulate their respective rights in relation to the Project following exercise of the Call Option under the terms of the JVA. Under the terms of the JVA (as amended), all significant decisions regarding the conduct of Jumelles' business (other than certain protective rights which require the agreement of shareholders holding at least 95% of the voting rights in Jumelles) are made by the Board of Directors.

Glencore has the right to appoint three directors to the Jumelles Board while ZIOC has a right to appoint two directors. At any Jumelles Board meeting, the directors nominated by Glencore have between them such number of votes as represents Glencore's voting rights in the general meetings of Jumelles and the directors nominated by ZIOC have between them such number of votes as represents ZIOC's voting rights in the general meetings of Jumelles.

As a consequence of the provisions of the JVA (in its original version and as subsequently amended), following exercise of the Xstrata Call Option in February 2011 and Xstrata's merger with the Glencore group to form Glencore Xstrata (May 2013), Glencore controls Jumelles at both a shareholder and director level and therefore controls what was the Company's sole mineral asset, the Zanaga Project. Going forward the Company accounted for this as an investment in associate in respect of the Project with Glencore.

Following exercise of the Call Option, the principal business of the Company has been to manage its 50% less one share interest in the Project. Initially this involved the monitoring of both the finalisation of the pre-feasibility study and the preparation of the feasibility study. Going forward emphasis has been placed on progressing the key objectives of the Project team. These objectives include the establishment of port and power agreements with relevant developers, issue of the environmental permit, and ratification of the Zanaga Mining Convention by the Parliament of the RoC. These items form important milestones as the Project moves toward attracting the finance required for the implementation of Stage One.

Future funding requirements and going concern basis of preparation

The directors have prepared the accounts on a going concern basis. At 31 December 2017 the Company had cash reserves of US$3.7m

Similar to the Funding Agreement for 2017 project expenditure, Glencore and ZIOC have agreed a Funding Agreement to fund the 2018 Project Work Programme and Budget for the Project of US$1.3m plus US$0.22m of discretionary spend dependent on certain workstreams requiring capital. After taking in savings arising from previous years, Zanaga Iron Ore Company (ZIOC) has agreed to contribute towards such work programme and budget an amount comprising US$0.65m plus 49.99% of all discretionary items approved jointly with Glencore. Ignoring any entitlement to savings, ZIOC's potential contribution to the Project in 2018 is US$0.76m in total.

The Company's current cash reserves are sufficient to support both the Company's own operating costs and the agreed contribution to the Project set out above for the foreseeable future.

In common with many exploration and development companies in the mining sector, the Company raises funding in phases as its project develops.

If construction of the mine and related infrastructure proceeds (including any preparatory steps associated with the construction of the mine and related infrastructure), and the Company elects to fund its pro rata equity share of construction capital expenditure, it will need raise further funds. There is no certainty as to the Company's ability to raise the required finance or the terms on which such finance may be available

In addition, any decision of the Jumelles Board to proceed with construction of the mine and related infrastructure (or any variant such as a low-cost small scale start-up) is itself dependent upon the ability of Jumelles to raise the necessary debt and equity to finance such construction and the initial operation of the mine. Jumelles itself may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all and should this occur, it is highly likely to pose challenges to the proposed development of the Zanaga Project and the proposed timeline for its development.

The Company still believes that once the proposed staged development of the Zanaga project occurs, the Project offers high grade ore at competitive cost, thereby offering an attractive rate of return, at an acceptable level of risk. However, in order to carry out such staged development, it is still the case that substantial capital expenditure will be required both at the prospective mine site and in respect of transportation and other associated infrastructure and for working capital. Revenues from mining are dependent upon such development being financed and taking place. The current state of the global iron ore market means that there can be no certainty as to when Jumelles and the Company are able to raise new finance for the staged development of the Project or when the Zanaga Project is likely to be developed. The difficult prevailing economic conditions also impact upon the ability of Jumelles and the Company to raise new finance for the project.

At a time when the staged development of the Project takes place (or, if viable, a small-scale start-up takes place) the Company will need to obtain additional funding should it decide to elect to fund its share of any such development of the mine. If such staged development continues to be deferred due to unfavourable market conditions, the Company will need at the appropriate time to explore options to raise additional funding, pending the staged development (or, if viable, a small-scale start-up) taking place.

At present, the Company has sufficient financial resources to continue in operational existence for the foreseeable future. For these reasons, the financial statements of the Company have been prepared on a going concern basis.

2 Accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of preparation

These financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ("Adopted IFRS"). Adopted IFRS comprises standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") as adopted by the European Union.

The financial statements consolidate those of the Company and its subsidiary Zanaga UK Services Limited (together, the "Group") and the Company's investment in an associate which is accounted for using the equity method.

The company's presentation currency and functional currency is US dollars.

New standards, amendments and interpretations

The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

· IFRS 9 Financial Instruments (effective date 1 January 2018).

· IFRS 15 Revenue from contracts with customers (effective date 1 January 2018).

· IFRS 16 Leases (effective date 1 January 2019)

Measurement convention

These financial statements have been prepared on the historical cost basis of accounting.

The preparation of financial statements in conformity with Adopted IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the financial statements from the date that control commences until the date that control ceases.

Associates

Investments in associates are recorded using the equity method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition changes in the Group's share of the net assets of the associate. The Group profit or loss and other comprehensive income includes the Group's share of the associate's profit or loss and other comprehensive income. The investment is considered for impairment annually.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from the intra-group transactions, are eliminated in preparing the financial statements.

Foreign currency

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.

Share-based payments

The Group makes equity-settled share-based payments to certain employees and similar persons as part of a long-term incentive plan ("LTIP"). The fair value of the equity-settled share-based payments is determined at the date of the grant and expensed, with a corresponding increase in equity, on a straight line basis over the vesting period, based on the Group estimate of the awards that will eventually vest, save for any changes resulting from any market-performance conditions.

Where awards were granted to employees of the Group's associate and similar persons, the equity-settled share-based payments were recognised by the Group as an increase in the cost of the investment with a corresponding increase in equity over the vesting period of the awards. In equity accounting for the Group's share of its associate, the Group has accounted for the cost of equity settled share-based payments as if it were a subsidiary.

The shares issued under the 2010 LTIP were acquired by an Employee Benefit Trust which subscribed for the shares at zero value. These shares are held by the Employee Benefit Trust until the vesting conditions have been met and the share options are exercised. During Q4 2017, all the outstanding share options were exercised and a small number of surplus shares held by the Employee Benefit Trust were distributed to beneficiaries of the Trust. The Employee Benefit Trust has now been discontinued.

Subsequent awards of share options have been structured as standard share options and did not involve the use of an employee benefit trust.

Information on the share awards is provided in Note 11 to these financial statements.

Share-based payments to non-employees

Where the Group received goods or services from a third party in exchange for its own equity instruments and the amount of equity instruments is fixed, the equity instruments and related goods or services are measured at the fair value of the goods or services received and are recognised as the goods are obtained or the services rendered. Equity instruments issued under such arrangements for the receipt of services are only considered to be vested once provision of services is complete. Such awards are structured as standard share options. No awards were issued in 2016 or 2017.

Non-derivative financial instruments

Non-derivative financial instruments in the balance sheet comprise other receivables, cash and cash equivalents, and trade and other payables.

Other receivables

Other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Ordinary shares issued to the Employee Benefit Trust under the LTIP or to non-employees for services provided to the Company, are included within Share Capital.

When share capital recognised as equity is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are cancelled.

Impairment

The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment; a financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. If any such indication exists, the asset's recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

Calculation of recoverable amount

The recoverable amount of the Group's investments and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. The effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their fair values less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Reversals of impairment

An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Expenses

Financing income and expenses

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

Segmental Reporting

The Group has one operating segment, being its investment in the Project, held through Jumelles. Financial information regarding this segment is provided in Note 6b.

Subsequent events

Post year-end events that provide additional information about the Group's position at the balance sheet date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to financial statements when material.

3 Critical accounting estimates, assumptions and judgements

The Group makes estimates and assumptions concerning the future that are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

Carrying value of Investment in Associate

The value of the Group's investment in Jumelles depends very largely on the value of Jumelles' interest in the Project. Jumelles assesses at least annually whether or not its exploration projects may be impaired. This assessment can involve significant judgement as to the likelihood that a project will continue to show sufficient commercial promise to warrant the continuation of exploration and evaluation activities. Key assumptions on valuing the project include long term price assumptions on a CFR IODEX 62% Fe forecast 57US/dmt with adjustments for quality, deleterious elements, moisture and freight. It is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from assumptions above could require a material adjustment to the carrying amount of the Investment in Associate

4 Note to the comprehensive income statement

Operating loss before tax is stated after charging/(crediting):

	2017	2016
	US$000	US$000
Share-based payments (see Note 11)	-	2
Net foreign exchange loss/(gain)	(313)	1,083
Directors' fees	258	270
Auditor's remuneration	64	58
Depreciation	-	3

Other than the Company Directors, the Group did not directly employ any staff in 2017 (2016: four). The three Directors received a total of US$258,000 remuneration for their services as Directors of the Group (2016: US$270,000). The amounts paid as Directors' fees are shown in the Directors' Remuneration Report in the 2017 Annual Report. The Directors' interests in the share capital of the Group are shown in the Directors' Remuneration Report in the 2017 Annual Report.

5 Taxation

The Group is exempt from most forms of taxation in the BVI, provided the Group does not trade in the BVI and does not have any employees working in the BVI. All dividends, interest, rents, royalties and other expense amounts paid by the Company, and capital gains are realised with respect to any shares, debt obligations or other securities of the Company, are exempt from taxation in the BVI.

The 2016 tax charge relates to the Company's subsidiary, Zanaga UK Services Limited.

	2017	2016
	US$000	US$000
Recognised in profit and loss:
Current year	-	(15)
Reconciliation of effective tax rate
Profit/(Loss) before tax	-	(2,945)
Income tax using the BVI corporation tax rate of 0% (2016: 0%)	-	-
Effect of tax rate in foreign jurisdictions	-	(15)
	-	(15)

The effective tax rate for the Group is Nil % (2016: 0.48%).

6a Property, Plant and Equipment

	Leasehold property	Fixtures	Total
	improvements	and fittings
	US$000	US$000	US$000
Cost
Balance at 1 January 2017	-	43	43
Additions	-	-	-
Disposals	-	-	-
Balance at 31 December 2017	-	43	43
Depreciation
Balance at 1 January 2017	-	43	43
Charge for period	-	-	-
Balance at 31 December 2017	-	43	43
Net book value
Balance at 31 December 2017	-	0	0
Balance at 31 December 2016	-	0	0

There are no assets held under finance leases or hire purchase contracts.

6b Investment in Associate

	US$000
Balance at 1 January 2016	37,809
Additions	676
Share of post-acquisition comprehensive loss	(619)
Share of post-acquisition currency translation reserve	7
Balance at 31 December 2016	37,873
Balance at 1 January 2017	37,873
Additions	588
Share of post-acquisition comprehensive loss	(824)
Share of post-acquisition currency translation reserve	(48)
Balance at 31 December 2017	37,589

At 31 December 2017, the investment represents a 50% less one share shareholding in Jumelles being 2,000,000 shares of the total share capital of 4,000,001 shares. The shares were acquired in exchange for shares in the Company. Originally recorded at cost, the investment has been adjusted for changes in the Company's share of the net assets of the associate, less impairment. The investment has been impaired down to the Company's share of the impaired value of the project declared in the accounts of the associate.

The additions to the investment during the year were due to the additional US$0.59m of investment agreed in accordance with the 2017 Funding Agreement (2016 US$0.67m).

The Company's investment in Jumelles continues to be, accounted for as an associate using the equity method of accounting as Glencore has control of the business as described in note 1.

The Group financial statements accounted for the Glencore transaction as an in-substance equity-settled share-based payment for the provision of services by Glencore to Jumelles in relation to the PFS and the FS. These services largely were provided through third party contractors, measured at the cost of the services provided.

As at 31 December 2017, Jumelles had aggregated assets of US$81.8m (2016: US$82.5m) and aggregated liabilities of US$0.8m (2016: US$0.8m). For the year ended 31 December 2017 there was no impairment charge (2016: US$nil) and incurred a loss before tax of US$1.4m (2016: US$1.2m). There was no tax charge for 2017 (2016: US$nil). Currency translation of the underlying Congolese asset generated a translation loss of US$0.1m (2016: US$0.0014m). A summarised consolidated balance sheet of Jumelles for the year ended 31 December 2017, including adjustments made for equity accounting, is included below. The adjustments include US$9.074m decrease to share capital and a corresponding US$9.074m increase to the accumulated deficit for the LTIP settled at Jumelles level by shares in the parent entity in 2014."

	2017	2016
	US$000	US$000
Non-current Assets:
Property, plant and equipment	1,519	1,842
Exploration and other evaluation assets	80,000	80,000
Total non-current assets	81,519	81,842
Current Assets	356	756
Current Liabilities	(772)	(846)
Net current liabilities	(417)	(90)
Net assets	81,103	81,752
Share capital	338,190	337,096
Translation reserve	(4,823)	(4,728)
Accumulated deficit	(252,264)	(250,616)
	81,103	81,752

7 Other receivables

	2017	2016
	US$000	US$000
Prepayments and receivables	15	25
Amounts receivable from the Jumelles group	34	35
Other receivables	49	60

8 Cash

	2017	2016
	US$000	US$000
Cash and cash equivalents	3,721	4,852

9 Trade and other payables

	2017	2016
	US$000	US$000
Accounts payable	75	99
UK corporation tax	-	14
	75	113

No amounts payable are due in more than 12 months (2016: US$nil).

10 Share capital

In thousands of shares	Ordinary Shares	Ordinary Shares
	2017	2016
On issue at 1 January - fully paid	278,777	278,777
Shares issued	-	-
Shares repurchased and cancelled	-	-
On issue at 31 December - fully paid	278,777	278,777

The Company is able to issue an unlimited number of no par value shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. No dividends have been paid or declared in 2017 or in the current year (2016: US$nil).

Share capital changes in 2017

There were no shares issued in 2017, nor were there any share repurchases.

11 Share-based payments

Employees

No awards were issued in 2017.

Awards currently in operation are as follows:

Award 1 (fully vested)

These awards vested on the publication of the results of the VEE, which was achieved in October 2011.

Award 2 (fully vested)

These awards fully vested in 2012 on the expiry of two years following Admission.

Award 6 (fully vested)

These awards have fully vested.

Award 7 (fully vested)

These awards have fully vested.

Award 8 (fully vested)

These awards vested on the date of grant in July 2014.

Award 9 (fully vested)

These awards have fully vested.

Details of current awards are as follows:

Award 1 (2010)

Award 2 (2010)

Award 6 (2014)

Award 8 (2014)

Award 9 (2014)

Total

Weighted

Average

Exercise Price

(£)

Number

(£)

Number

(£)

Number

(£)

Number

(£)

Number

(£)

Number

At 1 January 2016 *

£0.02

2,727,345

£0.02

995,382

N/A

Nil

N/A

Nil

N/A

Nil

£0.02

3,722,727

(US$0.04)

Granted

N/A

Nil

N/A

Nil

0.01

1,204,619

0.01

1,013,418

0.01

4,000,000

0.01

6,218,037

Forfeited

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

Exercised

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

Lapsed

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

At 31 December 2016 *

£0.02

2,727,345

£0.02

995,382

0.01

1,204,619

0.01

1,013,418

0.01

4,000,000

£0.01

9,940,764

(US$0.04)

(US$0.01)

(US$0.02)

At 1 January 2017 *

£0.02

2,727,345

£0.02

995,382

0.01

1,204,619

0.01

1,013,418

0.01

4,000,000

£0.01

9,940,764

(US$0.04)

(US$0.02)

At 31 December 2017 *

£0.02

2,727,345

£0.02

995,382

0.01

1,204,619

0.01

1,013,418

0.01

4,000,000

£0.01

9,940,764

(US$0.04)

(US$0.01)

(US$0.02)

	Award 1 (2010)	Award 2 (2010)	Award 6 (2014)	Award 8 (2014)	Award 9 (2014)	Total
Range of exercise prices *	£0.00-£0.02 (US$0.00-US$0.04)	£0.02 (US$0.04)	£0.00-£0.01 (US$0.00-US$0.02)	£0.01 (US$0.02)	£0.01 (US$0.02)	£0.00 - £0.02 (US$0.00-US$0.04)
Weighted average fair value of share awards granted in the period *	N/A	N/A	N/A)	N/A)	N/A	N/A
Weighted average share price at date of exercise (£)	N/A	N/A	N/A	N/A	N/A	N/A
Total share awards vested	2,727,345	995,382	1,137,338	1,013,418	4,000,000	8,337,685
Weighted average remaining contractual life (Days)	Nil	Nil	39	Nil	Nil	N/A
Expiry date	18 May 2021	18 May 2021	29 July 2024**	29 July 2024	29 July 2024	N/A

* Sterling amounts have been converted into US Dollars at the grant dates exchange rates of: Awards 1,2, US$1.547:£1.00, Subsequent awards US$ 1.6944:£1.00.

** Excepting 199,076 share options with expiry date 7 July 2023

The following information is relevant in the determination of the fair value of options granted during 2010 and 2014 which has applied option valuation principles during the year under the above equity-settled schemes:

	Award 1 (2010)	Award 2 (2010)	Award 6 (2014)	Award 8 (2014)	Award 9 (2014)
Option pricing model used	Black-Scholes	Black-Scholes	Black-Scholes	Black-Scholes	Black-Scholes

Weighted average share price at date of grant	£1.56 (US$2.41)	£1.56 (US$2.41)	£0.19 (US$$0.31)	£0.19 (US$$0.31)	£0.19 (US$$0.31)
Weighted average expected option life	0.7 years	1.0 years	5.0 years	4.0 years	4.6 years
Expected volatility (%)	50%	50% for less than	91%	91%	91%
		1 year expected life,
		55% for more than
		1 year expected life
Dividend growth rate (%)	Zero	Zero	Zero	Zero	Zero
Risk-free interest rate (%)	0.51% for	0.69% for	1.75% for	1.75% for	1.75% for
	6 month expected life	12 month expected life	12 month expected life	12 month expected life	12 month expected life
	0.69% for	1.12% for	2.25% in excess	2.25% in excess	2.25% in excess
	12 month expected life	24 month expected life	24 month expected life	24 month expected life	24 month expected life

* Sterling amounts have been converted into US Dollars at the grant dates exchange rates of: Awards 1,2, US$1.547:£1.00, Subsequent awards US$ 1.6944:£1.00.

The volatility assumption of awards 1 & 2 were measured by reference to the historic volatility of comparable companies based on the expected life of the option. Subsequent awards referenced the volatility of the Company's own history since the 2010 flotation.

Non-employees

Replacing awards made previously, or as new awards, on 29 July 2014 the Company also granted awards of share options in respect of consultancy services provided by Strata Capital UK LLP, Harris GeoConsult Ltd and Renroc International Ltd.

Consultancy	Weighted average share price at date of grant *	Weighted average fair value of share awards *	Weighted average expected life of option	Expiry date	Other LTIP terms, valuation model and assumptions applicable
Strata Capital	£0.19 (US$0.31)	£0.12 (US$0.20)	4 years	29 July 2024	Award 8 above
Harris GeoConsult	£0.19 (US$0.31)	£0.18 (US$0.31)	4 years	29 July 2024	Award 8 above
Renroc International	£0.19 (US$0.31)	£0.18 (US$0.31)	4 years	29 July 2024	Award 7 above

* Sterling amounts have been converted into US Dollars at the grant date exchange rate US$ 1.6944:£1.00.

The total equity-settled share-based payment expense recognised as an operating expense during the year was US$Nil, (2016: US$2,000). Further details of share-based payments awarded to Directors of the Group can be found in the Remuneration Report in the 2017 Annual Report.

The total charge during the year for equity-settled share-based payments awarded to employees of companies in which the Group has a significant interest totals US$nil (2016: US$nil).

12 Profit/(Loss) per share

	2017		2016
Profit/(Loss) (Basic and diluted) (US$,000)		(1,393)		(2,960)
Weighted average number of shares (thousands)
Basic
Issued shares at beginning of period		278,777		278,777
Effect of shares issued		-		-
Effect of share repurchase and cancellation		-		-
Effect of own shares		(3,842)		(3,842)
Effect of share split		-		-
Weighted average number of shares at 31 December - basic		274,935		274,935
Profit/(Loss) per share
Basic (Cents)		(0.5)		(1.1)
Diluted (Cents)	(0.5)		(1.1)

There are potential ordinary shares outstanding, refer to Notes 10 and 11 for details of these potential ordinary shares.

13 Financial instruments

Fair values of financial instruments

Other receivables

The fair value of other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. The fair values approximate book values.

Trade and other payables

The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. The fair values approximate book values.

Cash and cash equivalents

The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

Financial Risk Management

The Group's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (comprising currency risk and interest rate risk). The Group seeks to minimise potential adverse effects of these risks on the Group's financial performance. The Board has overall responsibility for managing the risks and the framework for monitoring and coordinating these risks. The Group's financial risk management policies are set out below:

(a) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group receivables related parties. The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. At 31 December, the financial assets exposed to credit risk were as follows:

	2017	2016
	US$000	US$000
Cash and cash equivalents	3,721	4,852
Jumelles	34	35

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall due. The Group evaluates and follows continuously the amount of liquid funds needed for business operations, in order to secure the funding needed for business activities and loan repayments. The availability and flexibility of the financing is needed to assure the Group's financial position. The Group funding requirements are detailed in Note 1.

Details of the maturity of financial liabilities are provided in Note 9.

(i) Foreign currency risk

The foreign currency denominated financial assets and liabilities are not hedged, thus the changes in fair value are charged or credited to profit and loss.

As at 31 December 2017 the foreign currency denominated assets include cash balances held in Sterling of US$3,720,990 (2016: US$4,852,000), other receivables denominated in Sterling of US$48,548 (2016: US$60,000), and payables of US$75,923 (2016: US$98,566) denominated in Sterling.

The following significant exchange rates applied during the year:

		Reporting date		Reporting date
	Average rate	spot rate	Average rate	spot rate
	2017	2017	2016	2016
Against US Dollars	US$	US$	US$	US$
Pounds Sterling	1.3404	1.3513	1.2346	1.3550

Sensitivity analysis

A 10% weakening of the following currencies against the US Dollar at 31 December 2017 would have increased/(decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.

This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.

	Equity	Profit or loss	Equity	Profit or loss
	2017	2017	2016	2016
	US$000	US$000	US$000	US$000
Pounds Sterling	(372)	(372)	(485)	(485)

A 10% strengthening of the above currencies against the US Dollar at 31 December would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor and market confidence. Capital consists of share capital and retained earnings.

The Directors do not intend to declare or pay a dividend in the foreseeable future but, subject to the availability of sufficient distributable profits, intend to commence the payment of dividends when it becomes commercially prudent to do so.

The Company has a share incentive programme which is now administered by the Board. The share incentive programme is discretionary and the Board will decide whether to make share awards under the share incentive programme at any time. In Q4 2017 all then outstanding share options over already issued shares in the LTIP split interest scheme were exercised, a small number of surplus shares were distributed to beneficiaries of the Employee Benefit Trust involved in the scheme and the LTIP split interest scheme was then discontinued.

14 Commitments for expenditure

The Group had no capital commitments or off-balance sheet arrangements at 31 December 2017 (31 December 2016: nil).

Related parties

The Group's relationships with Jumelles and Glencore are described in Note 1 above.

The following transactions occurred with related parties during the period:

	Transactions for the period		Closing balance (payable)/receivable
	2017	2016	2017	2016
	US$000	US$000	US$000	US$000
Funding:
Due from Jumelles	589	357	34	35

Transactions with key management personnel

	2017	2016
	US$000	US$000
Share-based payments	-	2
Directors' fees	258	270
Total	258	272

The Directors' have no material interest in any contract of significance subsisting during the financial year, to which the Group is a party.

*** End of Financial Statements ***

Glossary

AL₂O₃	Alumina (Aluminium Oxide)
Fe	Total Iron
JORC Code	The 2004 or 2012 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia
LOI	Loss on ignition
LOM	Life of mine
Mineral Resource	A concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories
Mn	Manganese
Ore Reserve	The economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proved Ore Reserves. A Probable Ore Reserve has a lower level of confidence than a Proved Ore Reserve but is of sufficient quality to serve as the basis for a decision on the development of the deposit.
P	Phosphorus
PFS	Pre-feasibility Study
SiO2	Silica

Zanaga Iron Ore Company Audited Results for the Year to 31 December 2017

2017 Highlights and post balance sheet events to June 2018

Chairman's Statement

Financial Review

Reserves & Resource Statement

Financial Statements

Glossary